A new report from Standard & Poor’s estimates up to $46 trillion in refinancing and new financing needs by companies during the next four years — and credit markets may not be able to handle it, the Business Insider reports.
According to the report, the global “wall” of non-financial corporate debt maturities coming due from 2012 to 2016 isn’t new to market observers.
Less discussed is the incremental financing that corporate debt issuers will need during this period to fund capital expenditure and working capital growth. S&P’s ratings services estimates the total amount of refinancing and new money requirements during the next five years at between $43 trillion and $46 trillion.

“This demand for funds will potentially compound the credit rationing that may occur as banks seek to restructure their balance sheets, and bond and equity investors reassess their risk-return thresholds,” the report’s authors wrote.
“These factors, amid the current eurozone crisis, a soft U.S. economic recovery following the Great Recession, and the prospect of slowing Chinese growth, raise the downside risk of a perfect storm for credit markets, in our view.”
Though S&P believes that this downside risk remains, it is their working assumption that global banks and debt capital markets will largely be able to continue to provide the majority of liquidity to allow most corporate issuers to proactively manage their forthcoming refinancings.
“However, the balance is fragile, and existing or new sensitivities could flare up, derailing this base case,” the authors write. “Governments and banking regulators are now not as well placed to counter another perfect storm scenario given that they have already expended so much of their fiscal and monetary arsenal to mitigate the problems arising in recent years.”
Other problems also loom for the U.S. economy.
At the end of this year, the Bush tax cuts are set to expire while automatic fiscal spending cuts are set to kick in, a combination known as a “fiscal cliff” that will do worse than suck an expected several hundred billion dollars out of the economy initially, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
The combination of tax hikes and spending cuts will yank $7 trillion out of the economy within a decade and throw the economy back into recession.
“There is about $7 trillion there that … could be taken out of the economy in a really stupid way that would likely push us into a recession immediately,” says MacGuineas, according to CNNMoney.Editor’s Note: The Final Turning Predicted for America. See Proof.